CASE STUDY

Harshad Chimanlal Modi vs Dlf Universal Ltd. & Anr 2005

 Year: 2005
 Date: 26 September 2005
 Court: Supreme Court of India
 Bench: Arijit Pasayat, C.K. Thakker

Facts of the case

1)The appellant-original plaintiff entered into a 'plot buyer agreement' ('agreement' for
short) with DLF Universal Limited, respondent No.1 original defendant No. 1 on
August 14, 1985 for purchase of a residential plot admeasuring 264 sq. metres. in
Residential Colony, DLF Qutub Enclave Complex, Gurgaon, Haryana.

2)The agreement was in the Standard Form Contract of the first respondent. According
to the appellant, the agreement was made in Delhi. The Head Office of respondent No.1
was situated in Delhi. Payment was to be made in Delhi.

3)The plaintiff paid an amount of Rs.12,974/- (Rupees twelve thousand nine hundred
seventy-four only) towards the first instalment. It is the case of the appellant that
payment was made by him in instalments as per the schedule to the agreement. In spite
of the payment of amount, the first respondent unilaterally and illegally cancelled the
agreement on April 04, 1988 under the excuse that the appellant had not paid dues
towards construction of Modular House to respondent No. 2- original defendant No. 2
- DLF Builders & Developers Pvt. Ltd.

4)The appellant objected to the illegal action of the first respondent and sent a legal
notice through an advocate calling upon the first respondent to carry out his part of the
contract but respondent No.1 replied that the agreement had been cancelled and nothing
could be done in the matter.
5)The appellant, in the circumstances, was constrained to file Suit No. 3095 of 1988 on
the Original Side of the High Court of Delhi for declaration, specific performance of
the agreement, for possession of the property and for permanent injunction.

6) In the prayer clause the plaintiff stated that:

a) pass a decree of declaration to the effect that there is a valid and existing contract
with regard to plot No. L-31/4, DLF Qutab Enclave Complex, Gurgaon, Haryana,
between the plaintiff and the Defendant No. 1;

b) pass a decree to the effect that the Defendant No. 1 is bound to abide by the contract,
i.e. plot buyer agreement dated 14.8.85 and the unilateral
rescinding/cancelling/withdrawing of the contract by the Defendant No. 1 is bad and
illegal;

c) pass a decree of specific performance directing the Defendant No. 1 to perform its
part of the contract by withdrawing the letter dated 4.4.88 and further accepting the
payments of the due instalments with regard to the plot from the plaintiff in accordance
with the terms and conditions of the agreement, and execute a sale deed in favour of the
plaintiff after the full money is paid to the Defendant No. 1 as per clause (22) of the
agreement;

d) pass a decree of permanent injunction restraining the Defendants from allotting,

selling, transferring, alienating in any manner whatsoever the said plot No. L-31/4 DLF
Qutub Enclave Complex, Gurgaon (Haryana) to any person other than the plaintiff and
further restrain them from interfering in any manner whatsoever with the possession or
rights of the plaintiff after the said plot has been handed over to the plaintiff;

e) pass a decree of delivery of possession against the Defendant No. 1 directing him to
hand over vacant and peaceful possession of the plot No. L-31/4 DLF Qutub Enclave
Complex, Gurgaon (Haryana) to the plaintiff, or in the event, the said plot is already
allotted and handed over to some other person by the Defendant No. 1, another plot in
the same Complex of equivalent area in identical location be handed over to the plaintiff
by the Defendant No. 1.

On December 09, 1988, a single Judge of the High Court of Delhi granted interim
injunction in favour of the plaintiff. A common written statement was filed by both the
defendants on March 29, 1989 controverting the claim of the plaintiff on merits. So far
as jurisdiction of the court was concerned, it was clearly admitted by both the parties.

In view of increase in pecuniary jurisdiction of the District Court, Delhi, the suit came
to be transferred from High Court of Delhi to District Court, Delhi on July 12, 1993 and
it was re-numbered as Suit No. 1036 of 1994. On February 17, 1997, the trial court
framed issues which did not include issue as to the jurisdiction of the court obviously
because jurisdiction of the court was not disputed by the defendants. As late as on
August 22, 1997, i.e. after more than eight years of the filing of the written statement,
the defendants filed an application under Order 6, Rule 17 of the Code of Civil
Procedure, 1908 (hereinafter referred to as the "Code") seeking amendment in the
written statement by raising an objection as to jurisdiction of Delhi Court to entertain
the suit. It was stated that the suit was for recovery of immovable property situated in
Gurgaon District. Under Section 16 of the Code, such suit for recovery of property could
only be instituted within the local limits of whose jurisdiction the property was situated.
Since the property was in Gurgaon, Delhi Court had no jurisdiction in the matter. On
January 16, 1998, the application was allowed and the written statement was permitted
to be amended. The amended written statement was filed which also contained a
statement that the jurisdiction of the court was "admitted".

On the basis of the amendment of written statement the learned Additional District
Judge framed an additional issue as under: Whether Delhi Civil court has jurisdiction
to try and entertain the present suit: OPD? After hearing the parties, the trial court by
an order dated May 25, 1998 upheld the contention of the defendants and ruled that
Delhi Court had no jurisdiction to try the suit. The plaint was, therefore, ordered to be
returned to the plaintiff for presentation to the proper court. The Court stated in this
view of the matter that the suit falls within the ambit of Section 16(d) of the Code of
Civil Procedure and the proviso thereto has no application on the facts of the present
case.

To final Supreme Court appeal:

Thus, it is held that the Delhi Civil Court has no jurisdiction to try the present suit and
as such, the Plaint in the present suit is returned to the Plaintiff for presentation in the
Proper Court. Parties through their counsel were directed to present in the proper Court
on 5.6.1998.

Being aggrieved by the said order, the appellant approached the High Court by filing
Civil Revision Petition No. 506 of 1998 which also came to be dismissed. Against the
said order, the appellant had approached Supreme Court. Notice was issued on
December 06, 1999 and parties were directed to maintain status quo.

On April 17, 2000, leave was granted, operation of the judgment was stayed and the
Additional District Judge, Tis Hazari, Delhi, was allowed to proceed with the suit but it
was stated that he would not deliver judgment "until further orders". Status quo granted
earlier was ordered to be continued.

Appellants submission to the hon’ble supreme court of India:

Ms. Indu Malhotra, learned counsel for the appellant contended that the courts below
have committed an error of law as well as of jurisdiction in allowing the amendment in
the written statement and in holding that Delhi Court had no jurisdiction. She submitted
that the defendants were having their Head Office at Delhi, the agreement had been
entered into at Delhi, payment was to be made and in fact made at Delhi, breach of
agreement took place at Delhi and hence Delhi Court had jurisdiction to entertain the
suit and the plaintiff could have instituted the suit in Delhi Court. It was also submitted
that the parties had agreed that the Delhi Court alone had jurisdiction in all matters
arising out of the transaction. It was urged that in the facts and circumstances of the
case, the courts below should not have exercised discretionary jurisdiction in favour of
the party who had filed a written statement in which jurisdiction of Delhi Court had
been expressly admitted. The written statement was filed in 1989 but an amendment
application was moved after more than eight years. Serious prejudice had been caused
to the plaintiff due to delay on the part of the defendants. When the defendants had
waived the objection as to jurisdiction by specifically admitting the jurisdiction of Delhi
Court, amendment ought not to have been allowed by the trial court nor such order
could have been confirmed by the High Court. The learned counsel also submitted that
even after the amendment was allowed and amended written statement was filed, in the
amended reply also, the defendants had stated that the jurisdiction of the court was
"admitted".

The counsel submitted that even on merits, no case had been made out by the
defendants. At the most, it was a case of accrual of cause of action in more than one
court. As Clause 28 1of the agreement specifically provided that the transaction would
be subject to the jurisdiction of Delhi Court, institution of suit in Delhi Court by the
plaintiff could not have been objected to and no order could have been passed by the
trial court holding that it had no jurisdiction and the plaint was required to be returned
to the plaintiff for presentation to the proper court.

Respondents submission to hon’ble supreme court

1
Clause 28 of the agreement read thus; The Delhi High Court or Courts subordinate to it, alone shall
have jurisdiction in all matters arising out of touching and/or concerning this transaction." Finally, it
was submitted that at the time of granting leave and admitting appeal, this Court permitted the trial court
to proceed with the matter. Accordingly, the evidence was led by the parties and the trial is concluded.
In view of the order of this Court, the trial court could not deliver the judgment. Considering the fact
that the agreement was executed in August, 1985 and more than two decades have passed, this Court
may issue necessary direction to the trial court to deliver judgment.
Mr. Rohatgi, Senior Advocate appearing for the respondents, on the other hand,
supported the order passed by the trial court and confirmed by the High Court. He
submitted that the suit relates to specific performance of agreement relating to
immovable property.

In accordance with the provisions of Section 16 of the Code, such suit can be instituted
where the immovable property is situated. Admittedly the property is situated in
Gurgaon (Haryana). Delhi Court, therefore, has no jurisdiction to entertain the suit
which is for specific performance of agreement of purchase of a plot - immovable
property - situate outside Delhi. According to the counsel, even if it was not contended
by the defendants that Delhi Court had no jurisdiction or there was an admission that
Delhi Court had jurisdiction, it was totally irrelevant and immaterial. If the court had
no jurisdiction, parties by consent cannot confer jurisdiction on it. The counsel also
submitted that this is not a case in which two or more courts have jurisdiction and parties
have agreed to jurisdiction of one court.

According to Mr. Rohatgi, Section 20 of the Code would apply where two courts have
jurisdiction and the parties agree as to jurisdiction of one such courts by restricting their
right to that forum instead of the other. When Delhi Court had no jurisdiction
whatsoever, no reliance could be placed either on Section 20 of the Code or on Clause
28 of the agreement. The order passed by the trial court and confirmed by the High
Court is, therefore, legal and lawful and the appeal deserves to be dismissed, submitted
the counsel.

Having heard learned counsel for the parties and having considered the relevant
provisions of the Code as also the decisions cited before us, in our opinion, the order
passed by the trial court and confirmed by the High Court deserves no interference. As
stated above, it is an admitted fact that the suit relates to the recovery of immovable
property, a plot admeasuring 264 sq. mtrs. in the Residential Colony DLF Qutub
Enclave Complex, Gurgaon.
It is not in dispute by and between the parties that the property is situate in Haryana. It
is no doubt true that the defendants are having their Head Office at Delhi. It is also true
that the agreement was entered into between the parties at Delhi. It also cannot be denied
that the payment was to be made at Delhi and some instalments were also paid at Delhi.
The material question, however, is in which court a suit for specific performance of
agreement relating to immovable property would lie? Now, Sections 15 to 20 of the
Code contain detailed provisions relating to jurisdiction of courts. They regulate forum
for institution of suits. They deal with the matters of domestic concern and provide for
the multitude of suits which can be brought in different courts. Section 15 requires the
suitor to institute a suit in the court of the lowest grade competent to try it. Section 16
enacts that the suits for recovery of immovable property, or for partition of immovable
property, or for foreclosure, sale or redemption of mortgage property, or for
determination of any other right or interest in immovable property, or for compensation
for wrong to immovable property shall be instituted in the court within the local limits
of whose jurisdiction the property is situate.

Proviso to Section 16 declares that where the relief sought can be obtained through the
personal obedience of the defendant, the suit can be instituted either in the court within
whose jurisdiction the property is situate or in the court where the defendant actually or
voluntarily resides, or carries on business, or personally works for gain. Section 17
supplements Section 16 and is virtually another proviso to that section.

It deals with those cases where immovable property is situated within the jurisdiction
of different courts. Section 18 applies where local limits of jurisdiction of different
courts is uncertain. Section 19 is a special provision and applies to suits for
compensation for wrongs to a person or to movable property. Section 20 is a residuary
section and covers all those cases not dealt with or covered by Sections 15 to 19.

Section 16 thus recognizes a well-established principle that actions against res or

property should be brought in the forum where such res is situate. A court within whose
territorial jurisdiction the property is not situate has no power to deal with and decide
the rights or interests in such property. In other words, a court has no jurisdiction over
a dispute in which it cannot give an effective judgment. Proviso to Section 16, no doubt,
states that though the court cannot, in case of immovable property situate beyond
jurisdiction, grant a relief in rem still it can entertain a suit where relief sought can be
obtained through the personal obedience of the defendant. The proviso is based on well-
known maxim "equity acts in personam, recognized by Chancery Courts in England.
Equity Courts had jurisdiction to entertain certain suits respecting immovable properties
situated abroad through personal obedience of the defendant.

The principle on which the maxim was based was that courts could grant relief in suits
respecting immovable property situate abroad by enforcing their judgments by process
in personam, i.e. by arrest of defendant or by attachment of his property.

Analysis and Judgment

Plain reading of Section 20 of the Code leaves no room of doubt that it is a residuary
provision and covers those cases not falling within the limitations of Sections 15 to 19.

The opening words of the section "Subject to the limitations aforesaid" are significant
and make it abundantly clear that the section takes within its sweep all personal actions.
A suit falling under Section 20 thus may be instituted in a court within whose
jurisdiction the defendant resides, or carries on business, or personally works for gain
or cause of action wholly or partly arises.

It is, no doubt true, as submitted by Ms. Malhotra that where two or more courts have
jurisdiction to entertain a suit, parties may by agreement submit to the jurisdiction of
one court to the exclusion of the other court or courts. Such agreement is not hit by
Section 28 of the Contract Act, 1872, nor such a contract can be said to be against public
policy. It is legal, valid and enforceable.
Before more than thirty years, such question came up for consideration before this Court
in Hakam Singh v. Gamon2.

It was the first leading decision of this Court on the point. There, a contract was entered
into by the parties for construction of work. An agreement provided that
notwithstanding where the work was to be executed, the contract 'shall be deemed to
have been entered into at Bombay' and Bombay Court 'alone shall have jurisdiction to
adjudicate' the dispute between the parties. The question before this Court was whether
the court at Bombay alone had jurisdiction to resolve such dispute.

Upholding the contention and considering the provisions of the Code as also of the
Contract Act, this Court stated:

By Clause 13 of the agreement it was expressly stipulated between the parties that the
contract shall be deemed to have been entered into by the parties concerned in the city
of Bombay. In any event the respondents have their principal office in Bombay and they
were liable in respect of a cause of action arising under the terms of the tender to be
sued in the courts of Bombay. It is not open to the parties by agreement to confer by
their agreement jurisdiction on a court which it does not possess under the Code.

But where two courts or more have under the Code of Civil Procedure jurisdiction to
try a suit or proceeding on agreement between the parties that the dispute between them
shall be tried in one of such courts is not contrary to public policy.

Such an agreement does not contravene Section 28 of the Contract Act. Hakam Singh
was followed and principle laid down therein reiterated in several cases thereafter.

2
(India) Ltd., (1971) 3 SCR 314
The question, however, is whether Delhi Court has jurisdiction in the matter. If the
answer to that question is in the affirmative, the contention of the plaintiff must be
upheld that since Delhi Court has also jurisdiction to entertain the suit and parties by an
agreement had submitted to the jurisdiction of that court, the case is covered by Section
20 of the Code and in view of the choice of forum, the plaintiff can be compelled to
approach that court as per the agreement even if other court has jurisdiction.

If, on the other hand, the contention of the defendant is accepted and it is held that the
case is covered by Section 16 of the Code and the proviso to Section 16 has no
application, nor Section 20 would apply as a residuary clause and Delhi Court has no
jurisdiction in the matter, the order impugned in the present appeal cannot be said to be
contrary to law. As we have already indicated, the suit relates to specific performance
of an agreement of immovable property and for possession of plot. It is, therefore,
covered by the main part of Section 16. Neither proviso to Section 16 would get
attracted nor Section 20 (residuary provision) would apply and hence Delhi Court lacks
inherent jurisdiction to entertain, deal with and decide the cause.

From the aforesaid principles laid down by the Supreme Court it is abundantly clear
that where the parties to a contract agreed to vest jurisdiction to a particular Court
although cause of action has arisen within the jurisdiction of different Courts, including
that particular Court, the same cannot be said to be void or to be against the public
policy. It was also made clear in the said decision that if however, a particular Court
does not have any jurisdiction to deal with the matter and no part of cause of action has
arisen within the jurisdiction of that Court, the parties by their consent and mutual
agreement cannot vest jurisdiction in the said Court. Therefore, a clause vesting
jurisdiction on a Court which otherwise does not have jurisdiction to decide the matter,
would be void as being against the public policy.
Ms. Malhotra, then contended that Section 21 of the Code, requires that the objection
to the jurisdiction must be taken by the party at the earliest possible opportunity and in
any case where the issues are settled at or before settlement of such issues. In the instant
case, the suit was filed by the plaintiff in 1988 and written statement was filed by the
defendants in 1989 wherein jurisdiction of the court was 'admitted'.

On the basis of the pleadings of the parties, issues were framed by the court in February,
1997. In view of the admission of jurisdiction of court, no issue as to jurisdiction of the
court was framed. It was only in 1998 that an application for amendment of written
statement was filed raising a plea as to absence of jurisdiction of the court. Both the
courts were wholly wrong in allowing the amendment and in ignoring Section 21 of the
Code. The jurisdiction of a court may be classified into several categories. The
important categories are

(i) Territorial or local jurisdiction;

(ii) Pecuniary jurisdiction; and

(iii) Jurisdiction over the subject matter.

So far as territorial and pecuniary jurisdictions are concerned, objection to such

jurisdiction has to be taken at the earliest possible opportunity and in any case at or
before settlement of issues. The law is well settled on the point that if such objection is
not taken at the earliest, it cannot be allowed to be taken at a subsequent stage.
Jurisdiction as to subject matter, however, is totally distinct and stands on a different
footing. Where a court has no jurisdiction over the subject matter of the suit by reason
of any limitation imposed by statute, charter or commission, it cannot take up the cause
or matter. An order passed by a court having no jurisdiction is nullity. No court other
than the court where the property is situated can entertain such suit. Hence, even if there
is an agreement between the parties to the contract, it has no effect and cannot be
enforced.
Hence, even though the plaintiff is right in submitting that the defendants had agreed to
the jurisdiction of Delhi Court and in the original written statement, they had admitted
that Delhi Court had jurisdiction and even after the amendment in the written statement,
the paragraph relating to jurisdiction had remained as it was, i.e. Delhi Court had
jurisdiction, it cannot take away the right of the defendants to challenge the jurisdiction
of the court nor it can confer jurisdiction on Delhi Court, which it did not possess.

Since the suit was for specific performance of agreement and possession of immovable
property situated outside the jurisdiction of Delhi Court, the trial court was right in
holding that it had no jurisdiction.

The counsel for the appellant drew out attention to Rule 32 of Order XXI of the Code
which relates to execution. It, however, presupposes a decree passed in accordance with
law. Only thereafter such decree can be executed in the manner laid down in Rules 32,
34 or 35 of Order XXI. Those provisions, therefore, had no relevance to the question
raised in the proceedings.

For the foregoing reasons, in the court’s opinion, no case has been made out by the
appellant against the order passed by the trial court and confirmed by the High Court.

The appeal, therefore, deserves to be dismissed and is accordingly dismissed. In the

facts and circumstances of the case, however, there shall be no order as to costs.